HVAC demand in the Middle East

Owing to the current demand, boosted by heavy construction activity, the heating, ventilation, and air conditioning (HVAC) market in the GCC is expected to grow at a compound annual growth rate (CAGR) of 7.4% until the end of 2016, according to forecasts from analysts. With events such as Expo 2020 and the 2022 FIFA World Cup in Qatar, the demand for HVAC technologies will only continue to rise.

Increased construction activity has fueled demand for HVAC systems.

A report by Research and Markets said that one of the key factors contributing to this market growth is the increasing level of construction activities in the region. This has driven the growth of the HVAC market in the GCC countries, as the sale of HVAC equipment is highly correlated to construction activities. Rising demand for commercial and residential buildings is also fuelling regional HVAC market growth.

Commenting on the report, an analyst from the Research and Markets team says: “The HVAC market in the GCC is witnessing the use of highly advanced and innovative technologies. The evaporative cooling is one such technology that has huge growth potential in the region.” Unlike traditional air conditioning systems, which work on a vapour-compression technique, evaporating cooling works on the concept of water’s large enthalpy of vaporisation. This can easily be used in open spaces such as schools, factories, bus stops, sports grounds, and outdoor swimming pools.

The factors leading to the growing use of this technology in the GCC are an increasing awareness of cooling systems’ effectiveness, increasing electricity costs, and the low energy consumption of air-cooling systems. Also, an increased awareness of health and safety in workplaces, which places greater emphasis on the need for comfortable conditions in hotter industrial and construction environments, has led to the increased use of advanced and innovative technologies in the GCC.

Spurred on by the development, regional vendors in the HVAC market have devised new technologies and solutions to satisfy the growing demand. According to tech giant LG Electronics, massive investment plans by real estate groups and government entities has been one of the key drivers, due to a vast array of newly announced infrastructure and tourism projects.

Commenting on the trend, Kevin Cha, president, Middle East and Africa, LG Electronics, says: “Companies are investing in research and development (R&D) and designing new products that have better energy ratings and result in lower emissions and utility bills. With such a proactive approach by industry players, including us, the HVAC industry looks set to experience robust growth in the coming years in response to increasing demand.”

New green and energy-efficient concepts in the design of shopping centres, hospitals, residential structures, airports, and hotels have also driven growth in the HVAC market.

Additionally, a number of HVAC-related regulatory bodies have begun to crop up across in the region. These include LEED certification, GCC Standardisation Council (GSO), and Arab Energy Efficiency Building Regulations. As a result, HVAC manufacturers and their respective suppliers need to ensure their offerings adhere to the energy efficiency standards set out by regional policy-makers.

Global technology powerhouse Siemens recently issued a report saying that by implementing two key smart technologies for building management and district cooling, the amount of energy required for cooling can be reduced by up to 40%. Koen Bogers, senior executive vice president, building technologies division at Siemens Middle East, says in the report: “Cooling is considered to be responsible for approximately 70% of the GCC’s electricity demand during peak summer months, so it’s important that we evaluate the entire cooling chain to identify where technology can generate savings.”

The report further adds that digital technologies have huge potential to make cities more sustainable. Bogers says: “Cooling amounts to some 70% of a building’s average electricity bill in the GCC and, aside from the clear environmental benefits, there is also a strong business case for such types of technology. For example, at Dubai’s Wafi Mall, our Demand Flow solution achieved a 30% saving on utility costs in its first year, representing an annual cost saving of some $439,000, with a guaranteed payback period of two-and-a-half years.”

Although there are literally thousands of players in the regional HVAC market, international names from China, Korea, Japan, and so on are already climbing up the ladder to claim the top supplier spot. Chinese HVAC giant, Gree Appliances, registered a solid growth in its annual sales, which hit 40,000 units in its first year of operation, mainly driven by demand from Saudi Arabia and the UAE. In the UAE, the Chinese firm sells its unit in partnership with NIA Limited.

According to Gree, the GCC accounts for more than 50% of the total air-conditioner units sold in the Middle East and North Africa (MENA) region, with the UAE and Saudi Arabia being the biggest markets. In 2015, the total number of units exported from China to Saudi Arabia were in excess of 2.8 million, of which Gree’s share exceeded 909,000 units. The UAE, meanwhile, imported a total of 907,000 units during the same period, with the company’s share of the total demand comprising 213,000 units.

Commenting on Gree’s regional presence, Zakir Ahmed, the managing director of NIA Limited UAE, says: “We expect continuity in growth, despite the current soft landing across economies, since Gree serves the tier-two segment of the MENA market. This will be crucial to our performance, especially as the current market sentiments will entail more clients with greater price differentiation.

“With reports suggesting that the global HVAC market is expected to generate over $68.9bn at an estimated CAGR of 4.3% from 2016 to 2022, our aim is to dominate the global air-conditioning scene by pursuing technology-oriented, diversified development, with a focus on energy-efficiency,” he adds.

Saudi Arabia leads the way for the strongest air-conditioning industry in the GCC, followed by the UAE, Qatar, and Kuwait. Although the HVAC market will continue grow in the region, supported by the robust construction sector, it will be interesting to see whether or not the increasing shift towards energy and environmental design certifications will spur the adoption of better HVAC design standards.